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Homeownership appears to be more out of reach than ever for many Americans, especially those waiting for real estate prices to fall. But there are still ways to buy a home today or prepare for a future purchase.
Build up your down payment. The higher real estate prices go, the higher the down payment will need to be. By saving at least 20% for a down payment, you can avoid paying private mortgage insurance (PMI) on a conventional loan.
Ask for gifts. In 2021 and 2022, a quarter of first-time homebuyers used cash gifts or loans from family or friends for their down payment, according to the National Association of Realtors’ Home Buyer and Seller Profile. Depending on your type of mortgage, you may also be allowed to receive a gift for your down payment from your employer, labor union, charity, or government agency that helps first-time homebuyers and low-income people. So feel free to ask!
Improve your credit score. As your credit score improves, you’ll have access to more mortgage options and better interest rates. The most important steps you can take to improve your credit include paying all your bills on time, paying off revolving debt to lower your credit utilization, and opening new accounts or closing old ones. This includes refraining from
Consider several loan types. Let’s take a look at the different types of mortgages that can help you buy the home you want, including government-backed mortgages. As an example, an FHA loan requires a borrower with a credit score as low as 580 to make a down payment of just 3.5 percent. For borrowers with scores between 500 and 579, a down payment as low as 10 percent of the purchase price is sufficient.
Start working with a real estate agent early. Engage a real estate agent early in the buying process, especially if you live in an area with an active real estate market. By having a professional on your side who knows what you’re looking for and how much you can spend, you’ll be able to see what properties are available before you fall for someone else. .
Remember, you can always refinance. Keep in mind that today’s high mortgage rates don’t have to last forever. When you’re ready, get a mortgage loan for the property you want. Remember, you can always refinance your mortgage if interest rates drop in the future. This can save you money on interest in the future, as well as lower your monthly payments when interest rates drop.
James Angell is a certified public accountant based in Willits. His office is located at 461 S. Main St. and he can be reached at 707-459-4205.
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